Issue No 165 February 2014 IR 787

AGENTS ANSWERS Inland Revenue s tax agents update End-of-year filing performance tips Issue No 165 February 2014 IR 787 Welcome to the first issue of Agents Answers for 2014. We hope you had a great break. With only a few weeks until the end of the tax year we re all anticipating that you ll achieve 100% filing. If you have EOT clients yet to file their 2013 returns, now s definitely the time to review them. The AMBR1004 current year returns outstanding report sent in mid-december gave details of those who hadn t filed up to that point. This report can help identify any follow-up action you might need to take to reach your 100% target. Be careful about linking clients close to the required filing date. If a client is required to file a 2013 tax return and you link them close to 31 March 2014 but can t: file the return by 31 March 2014, or update the return as not required their outstanding return will affect your filing performance. Please consider each case carefully before linking at this late stage so you can achieve the desired 100% filing performance. If necessary, talk to your account manager. Bankruptcy and the impact on linked clients We issue a new IRD number to anyone who s declared bankrupt. This process automatically delinks the client from their current agent, so if you want to relink to your client s new IRD number you ll need to call us on 0800 377 779 (tax agents) or 0800 473 011 (PTS intermediaries). You ll also need a new authority to act. During the period of bankruptcy all your clients mail will be sent to the Official Assignee. So please don t request an address or mailing indicator update unless your client has permission to be GST registered, and you want to receive their GST mail. If your client is required to or chooses to file an IR 3 for the year they are declared bankrupt, or if they would normally receive a personal tax summary, they need to file two IR 3 returns: one under the pre-bankrupt IRD number up until the date of bankruptcy, and one under their new IRD number from the date of bankruptcy to the end of the income year. During the period of bankruptcy we are obliged to send any income tax credits for the year to the Official Assignee. Please note that we don t apportion refunds in the year a client is declared bankrupt or the year they re discharged. Example Your client is declared bankrupt on 13 June 2010. On 13 June 2013 they re discharged. In the 2011, 2012, 2013 and 2014 income tax years they re due income tax refunds. These refunds are sent to the Official Assignee. (continued on next page) Welcome to Agents Answers In this issue: End-of-year filing performance tips, bankruptcy and the impact on linked clients, more time requested to prepare for child support reforms, seminars on changes to financial reporting requirements for companies, L letter availability for 2014, request for D status for 2013 returns, new identifier for companies, tips for new agents/agencies, GST zerorating of specialist tools, nonresident businesses and GST, new employer registration service saves time, Government tax policy work programme 2013 14, adjustments for late claims and section 20(3) of the Goods and Services Tax Act 1985, new ACC levy rates for 2014 15, key dates to prepare for. If you have any suggestions for topics you d like covered in this newsletter, email agents.answers@ird.govt.nz REMINDERS 7 February: Payment of residual income tax is due for the tax year ending 31 March 2013 for those without an extension of time (EOT). 14 February: This is the third interim filing date for tax agents with an EOT when 80% of returns should be filed. 28 February: Instalments of provisional tax and student loan interim payments are due for those with a May balance date. 1

(continued from previous page) Your client is still entitled to receive any Working for Families Tax Credits throughout the period of bankruptcy. To prevent income tax credits being issued to your client in error, we currently have halts placed on all bankrupt clients tax accounts, including those discharged in the 2013 year. This means you won t be able to see their details online and will need to call us on 0800 377 779 (tax agents) or 0800 473 011 (PTS intermediaries) if you want to request or confirm their personal tax summary. More time requested to prepare for child support reforms Late last year we approached Government seeking more time to prepare for the introduction of reforms to the child support scheme. The first of the reforms in the Child Support Scheme Amendment Act 2013 were scheduled to come into effect on 1 April 2014. Because of the complexity of the reforms, more time is needed to implement the new scheme to the high standard parents deserve and Government expects. Government is proposing deferment of the application date by one year. This will allow us time to work through the complex systems testing required to deliver the changes. This is subject to legislation being passed. The start date for the new calculation formula for child support will apply to assessment periods from 1 April 2015, instead of April this year. The remaining changes will come into effect from 1 April 2016. Customers will be told of this date change early in 2014. Customers child support for 2014 15 will be calculated using the current formula and rules. We ll be issuing notices to customers in March telling them the amounts they owe or will receive. Currently child support paying parents on salary and wages have options for paying their child support to us. From 1 April 2016, paying parents on salary and wages must have child support deductions made by their employer, with some exceptions. We ll continue to keep customers and employers informed throughout the year. For more on how to make child support deductions go to www.ird.govt.nz (search keywords: child support employer). For information on changes coming into effect from 1 April 2015, see the child support section on our website. Seminars on changes to financial reporting requirements for companies Amendments to the recently enacted Companies and Financial Reporting Acts mean most companies with annual revenue of less than $30 million and assets less than $60 million won t be legally required to apply accounting standards (GAAP). While not yet confirmed, this is expected to apply from 1 April 2014. The exempt (small) company/financial Reporting Order regime will also be removed at that time. The External Reporting Board (XRB), along with Inland Revenue and the New Zealand Institute of Chartered Accountants (NZICA), is running a series of seminars on these changes to financial reporting requirements. The seminars will cover: the new legislative requirements the XRB s new Accounting Standards Framework as it applies to for-profit SMEs, which includes the removal of Differential Reporting and Old GAAP the future financial reporting implications for SMEs the implications of adopting the relevant XRB standards (NZ IFRS RDR), for those SMEs that are required by the new laws to continue to follow GAAP Inland Revenue s new minimum financial reporting requirements for companies not required to apply GAAP NZICA s optional special purpose reporting package a question and answer session. The seminars will be held between 9 am and 11 am as follows: Place Date Auckland Tuesday 25 February Hamilton Wednesday 26 February Wellington Thursday 27 February Whangarei Friday 28 February Napier Tuesday 4 March Palmerston North Wednesday 5 March New Plymouth Thursday 6 March Gisborne Monday 10 March Nelson Thursday 13 March Greymouth Friday 14 March Christchurch Monday 17 March Dunedin Tuesday 18 March Invercargill Wednesday 19 March Tauranga Thursday 20 March Rotorua Friday 21 March A webinar will run on Friday 28 March from 9 am to 11 am. The seminars are free but participants are required to register in advance. This can be done at www.xrb.govt.nz Click on the link on the home page under Forthcoming Seminars. AGENTS ANSWERS Issue No 165 February 2014 2

L letter availability for 2014 Each year we turn off the programme that issues L letters. This will happen on 15 February. From then until early August 2014 you won t be able to request an L letter be sent to your client. If you have clients who haven t given you their records and you d like us to send them an L letter before the cut-off, you can request one by calling 0800 456 678. When we issue an L letter, the client is removed from your performance statistics until the return is filed. The return is still due by 31 March. You can see a sample L letter on the tax agents section of our website at www.ird.govt.nz/taxagents under Extension of time (EOT) arrangements for 2013 returns. For overseas clients, please talk with your account manager about options as we can t issue an L letter to an overseas address. Request for D status for 2013 returns Do you need further time to file your clients 2013 income tax returns beyond 31 March 2014? See our extension of time pages on the tax agents section at www.ird.govt.nz/taxagents under Extension of time (EOT) arrangements for 2013 returns, which sets out the requirements for D status. Applications must be in writing and give full details of the reasons and the expected date the return will be filed. Individual applications may be made, but bulk applications can only be made for groups of companies or entities. Make all applications through your account manager. We need to receive your applications by Friday 14 March 2014 to be able to process them by the last working day of March (Monday 31 March). Note: Local sites can t process Large Enterprise clients, nor can your account manager. In these cases please send your applications to payroll.bureau@ird.govt.nz New identifier for companies In December 2013, the New Zealand Companies Office started issuing a New Zealand Business Number (NZBN) to all limited liability companies. This 13-digit unique identifier can be used here and, in the future, internationally. Companies can use their NZBN immediately in transactions with the Companies Office and some private business-to-business transactions. While the NZBN will become the main identifier for most companies in future, it doesn t replace agency identifiers such as IRD, GST and ACC numbers and the Company Incorporation number. When contacting us on behalf of your company client please continue to provide their IRD number. You can find more on the NZBN at www.mbie.govt.nz (search keyword: nzbn). Tips for new agents/agencies Are you new to the tax agent role or setting up a new tax agency? If so, we provide all the information you ll need on tailored webpages at www.ird.govt/taxagents For a quick start, here are a few suggestions. Registering as a tax agent If you haven t registered as a tax agent yet you can download an IR 791 form from www.ird.govt.nz/taxagents Key forms and information, Forms and guides. If your agency has more than one agent, each one needs to complete an application form. Please post your completed form(s) to: Inland Revenue PO Box 39010 Wellington Mail Centre Lower Hutt 5045. Linking clients Once you ve registered, any client you represent will need to be linked to your agency so you can act on their behalf. You can find how to link your clients at www.ird.govt.nz/taxagents (search keywords: client maintenance), or request a bulk supply of IR 795 forms through StationeryXpress. Remember, you must have a signed written authority to act before you link a client. One-on-one help on hand We provide an Inland Revenue account manager for each tax agent. They provide: relationship management information and education monitoring and help with meeting your tax obligations. Staying up to date with tax changes Agents Answers is our monthly newsletter, published specifically for tax agents and agency staff. It provides commentary on new or amended tax law, and our policy and tax law interpretation. We also give due date reminders, tips on meeting our process needs and accessing self-service and online tools. If you or members of your staff aren t already receiving the Agents Answers newsletter email alert, you can register at www.ird.govt.nz/taxagents Subscribe now to receive free newsletters and notifications. GST zero-rating of specialist tools Effective from 1 April 2014, New Zealand manufacturers will be able to zero-rate specialised tools they supply to non-resident, non-gst-registered businesses, if the tools have been used in New Zealand solely to manufacture goods for export. AGENTS ANSWERS Issue No 165 February 2014 3

Non-resident businesses and GST Changes to the Goods and Services Tax Act 1985, effective from 1 April 2014, will allow non-resident businesses to register and claim back GST on goods and services received in New Zealand. These businesses will be known as non-resident GST business claimants. Criteria to claim a GST refund Non-resident businesses receiving goods or services in New Zealand will be able to register for GST to claim a GST refund if: A. they don t carry out or intend to carry out a taxable activity in New Zealand, and aren t a member and don t intend to become a member of a GST group carrying out a taxable activity in New Zealand, and B. in their country or territory of residence: they re registered for a consumption tax (eg, GST, VAT), or have a consumption tax which they re not required to be registered for, and they re carrying out a taxable activity with a turnover of more than NZ$60,000 in a 12-month period, or there s no consumption tax, and they re carrying out a taxable activity with a turnover of more than NZ$60,000 in a 12-month period, and C. they expect their first GST claim to be more than $500, and D. they don t have a taxable activity which involves providing a service where it s reasonably foreseeable that the service will be received in New Zealand by a person not registered for GST. Non-resident contractors Non-resident contractors are businesses that perform services in New Zealand under contract. Because they re carrying out a taxable activity in New Zealand they won t be able to register as a non-resident GST business claimant. Registering Non-residents will be able to register for GST using the new Non-resident GST business claimant registration (IR 564) form. This will be available on our website from 1 April 2014. They ll need to give us copies of documents, such as passport photo pages (for individuals, shareholders and directors of a company), business numbers, eg, the United Kingdom s unique taxpayer reference, proof of address and turnover, to prove their identity and show they meet the above requirements. As part of the registration application they ll be asked to provide copies of their tax invoices and proof of payment. This is to show their first GST claim is expected to be more than $500. We ll also be asking them to give us the information for their first GST return with their application. If we accept their registration we can then process their first GST return. As part of the declaration they ll be agreeing to the information being used as a first GST return self-assessment. Once we accept their first GST return, customers will be able to register for myir secure online services to file future GST returns. We re still in the process of confirming where to send documents. This information will be added to our website by 1 April 2014. Refunds A risk review will be part of all non-resident GST business claimant GST returns before a refund is released, so supporting documents will need to be sent at the time the return is filed. We can hold the refund for these customers for as long as required, provided we notified them within 90 working days instead of the normal 15. No credit use-of-money interest will apply to GST refunds for these customers. Please promote this change to your clients by referring them to our website, www.ird.govt.nz (search keywords: non-resident GST). New employer registration service saves time Later this month, new businesses will be able to register as an employer at the same time they incorporate their company, through the Companies Office website. Currently, businesses can choose to register for income tax and GST when incorporating on the Companies Office website. Having to register as an employer separately with us means they re duplicating most of the information they ve already provided. The new employer registration service on the Companies Office website now means companies can do it all at once, saving time, effort and cost. New employers will receive an employer pack and full information from Inland Revenue after they register as an employer. If you have clients planning to register a new company and employ staff, please let them know about this new service starting late February. AGENTS ANSWERS Issue No 165 February 2014 4

Government tax policy work programme 2013 14 In November 2013, the Minister of Revenue announced Government s tax policy work programme for the next 18 months to participants at the New Zealand Institute of Chartered Accountants tax conference. The programme covers three broad areas: 1. Improving current tax settings within the broadbase, low-rate tax framework, eg, black-hole research and development expenditure and a review of the tax rules for closely held companies. 2. International tax reform and addressing base erosion and profit shifting, eg, non-resident withholding tax on related-party debt. 3. Progressing Inland Revenue s business transformation and better public services programme. Find out more about this programme at www.taxpolicy.ird.govt.nz Work programme. Adjustments for late claims and section 20(3) of the Goods and Services Tax Act 1985 We re regularly asked to make adjustments to backperiod GST returns for unclaimed input tax deductions where the adjustment should be made in a current GST return period, as allowed under section 20(3) of the Goods and Services Tax Act 1985. There are certain circumstances (see Questions we've been asked QB 09/04) where the Commissioner will make amendments in an earlier period. However, the following are examples where the adjustment should be made in the next GST return period: an inability of the registered person to obtain a tax invoice a dispute over the proper amount of the payment for the taxable supply to which the deduction relates a mistaken understanding on the part of the registered person that the supply which the deduction relates to was not a taxable supply a clear mistake or simple oversight by the registered person. In these situations you or your clients can simply claim the GST in the next return. You don t need to ask us to amend the earlier return. You can read the full QB 09/04 at www.ird.govt.nz (search keyword: QB 09/04). New ACC levy rates for 2014 15 The new ACC levy rates for the 2015 tax year have been set and will be formalised when passed into legislation. The earners account levy per $100 of liable earnings (including GST) is $1.45. The minimum liable earnings for self-employed workers increases from $28,080 to $28,600. The maximum liable earnings will increase for: work and earners account for self-employed from $113,768 to $116,089 work account and the earners account for employees and private domestic workers from $116,089 to $118,191 work account for employees and private domestic workers to calculate the residual portion from $113,768 to $116,089. Key dates to prepare for With the end of the tax year upon us your clients may ask you when they ll get key documents from us. The table below sets out when returns and other key forms will be issued in 2014. March 2014 25 26 IR 526 forms issued to salary and wage (PTS) customers. end of March Income tax returns issued for: companies (IR 4) partnerships/look-through companies (IR 7) Māori authorities (IR 8) clubs or societies (IR 9). April 2014 1 e-file PTS and IR 3A available. Personal tax summary calculator available. Payment of end-of-year tax (for 7 clients with an EOT) is due. 11 Agents letter issued for IR 3A to non-summary of earnings (SOE) clients. May 2014 9 Agents letter issued for IR 3A SOE clients. IR 526 forms issued to IR 3A 13 14 customers. 19 22 SOEs issued. June 2014 mid-june PTS confirmation available. mid-june/ PTSs issued. early-august Agents Answers comments generally on topical tax issues relevant to tax agents. Every attempt is made to ensure the law is correctly interpreted, but articles are intended as a brief overview only. The examples provided are not intended to cover every possible factual situation. Email: agents.answers@ird.govt.nz www.ird.govt.nz AGENTS ANSWERS Issue No 165 February 2014 5